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Ingevity Gains 24% in 6 Months: What's Driving the Stock?

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Shares of Ingevity Corporation (NGVT - Free Report) have rallied around 24.2% over the last six months. The company has also outperformed its industry’s rise of roughly 6.3% to over the same time frame.



Ingevity, a Zacks Rank #3 (Hold) stock, has a market cap of roughly $4 billion. Average volume of shares traded in the last three months is around 219.6K. The company has an expected long-term earnings per share growth of 12%.

Let’s take a look at the factors driving this chemical company.

Driving Factors

Better-than-expected earnings performance, encouraging outlook and upbeat prospects from the Georgia-Pacific’s pine chemicals business buyout are contributing to the rally in Ingevity’s shares.

Notably, the company has an impressive earnings surprise history. It has outpaced the Zacks Consensus Estimate in each of the trailing four quarters, the average positive earnings surprise being 20.6%.

In its second-quarter call, the company raised the mid-point and narrowed the range for 2018 adjusted EBITDA to $302-$314 million from $293-$307 million. The company projects sales between $1.10 billion and $1.13 billion for the year.

Ingevity should gain from its strategy to pursue value-creating acquisitions. Earlier this year, the company closed the buyout of Georgia-Pacific’s pine chemicals business for $310 million. The buyout contributed to sales at the Performance Chemicals division in the second quarter. The acquisition is expected to create net synergies of roughly $11 million through manufacturing optimization, lower logistics costs and leveraged procurement costs.

Moreover, higher adoption of tall oil fatty acid (TOFA)-based products is driving the Performance Chemicals division. Healthy TOFA pricing had positive impact on the margins of the division during first-half 2018. The company also expects high margin application areas to continue gaining strength.

Ingevity Corporation Price and Consensus

 

Stocks to Consider

Stocks to consider in the basic materials space include KMG Chemicals, Inc. (KMG - Free Report) , CF Industries Holdings, Inc. (CF - Free Report) and Cabot Corporation (CBT - Free Report) .

KMG Chemicals has an expected long-term earnings growth rate of 29% and a Zacks Rank #1 (Strong Buy). The company’s shares have gained 39% in the past year. You can see the complete list of today’s Zacks #1 Rank stocks here.

CF Industries has an expected long-term earnings growth rate of 6% and a Zacks Rank #2 (Buy). The company’s shares have rallied 61% in the past year.

Cabot has an expected long-term earnings growth rate of 11% and a Zacks Rank #2. Its shares have risen 12% in a year’s time.

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